MUMBAI: The Income-Tax Appellate Tribunal has recently held that grant of loan-scholarships by JN Tata Endowment for higher education of Indian students overseas will not debar it from income-tax (I-T) exemption.
The trust, which was established in 1892 by Tata Group founder J N Tata, awards merit-based loan scholarships to students across India for higher studies overseas.Every year, 90 to 100 scholars are selected across disciplines ranging from the sciences (applied, pure and social) to management, law, commerce and the fine arts.
According to JNTE’s website, selected students enter into a legal agreement with the foundation. The loan-scholarship agreement is for seven years and the student is required to repay the full amount in five equal instalments between the third and seventh year. JNTE has a corpus of Rs 200 crore.
For FY11, JNTE had filed an I-T return declaring a nil income, owing to its tax exempt status. However, the I-T officer had held that ‘application of income’ and ‘charitable purpose’ should both be confined to India.
According to the I-T officer, mere payment to an Indian student in India was not sufficient for the purpose of exemption, as the education itself (which denotes application of income) was availed outside India.
In his assessment order, the I-T officer had added that – “If there is a charitable purpose, education (in this case), which tends to promote international welfare in which India is interested, an order from the Central Board of Direct Taxes is required…” for the purpose of claiming the tax exemption.
On these grounds, he held that the loan-scholarship amount of Rs 4 crore given to students for education abroad will not be exempt. Penalty proceedings for filing inaccurate particulars of income were separately initiated.
When the Commissioner (Appeals) ruled in favour of JNTE, the I-T officer filed an appeal with the ITAT. The tax tribunal ruled in favour of JNTE, holding that the education grant given to Indian students, in India, for higher education abroad fulfils conditions of application of money for such purpose in India. Tata Trusts, of which JNTE is part, declined to comment.
The trust, which was established in 1892 by Tata Group founder J N Tata, awards merit-based loan scholarships to students across India for higher studies overseas.Every year, 90 to 100 scholars are selected across disciplines ranging from the sciences (applied, pure and social) to management, law, commerce and the fine arts.
According to JNTE’s website, selected students enter into a legal agreement with the foundation. The loan-scholarship agreement is for seven years and the student is required to repay the full amount in five equal instalments between the third and seventh year. JNTE has a corpus of Rs 200 crore.
For FY11, JNTE had filed an I-T return declaring a nil income, owing to its tax exempt status. However, the I-T officer had held that ‘application of income’ and ‘charitable purpose’ should both be confined to India.
According to the I-T officer, mere payment to an Indian student in India was not sufficient for the purpose of exemption, as the education itself (which denotes application of income) was availed outside India.
In his assessment order, the I-T officer had added that – “If there is a charitable purpose, education (in this case), which tends to promote international welfare in which India is interested, an order from the Central Board of Direct Taxes is required…” for the purpose of claiming the tax exemption.
On these grounds, he held that the loan-scholarship amount of Rs 4 crore given to students for education abroad will not be exempt. Penalty proceedings for filing inaccurate particulars of income were separately initiated.
When the Commissioner (Appeals) ruled in favour of JNTE, the I-T officer filed an appeal with the ITAT. The tax tribunal ruled in favour of JNTE, holding that the education grant given to Indian students, in India, for higher education abroad fulfils conditions of application of money for such purpose in India. Tata Trusts, of which JNTE is part, declined to comment.
